Fraud can take many forms in a Small Business, but one of the most damaging is payroll fraud. Unless the owner handles all aspects of computing and paying payroll, there is room for fraud in every small business. The fact that your company has only a few employees does not guarantee that you will be safe.
Perhaps one of the easiest payroll fraud techniques is the overpayment of withholding or payroll taxes. Your bookkeeper simply overpays the government. When the refund check arrives, it is deposited by the employee to his or her personal account. In some cases, the employee will have an account at a different bank but in the company name. Such an account could be used for the fraudulent deposit of other company receipts as well.
The greater the number of employees, the easier it is to pull off a scam. Perhaps the payroll clerk has invented a fictitious employee or falsifies hours or commissions for a cooperating employee who shares the stolen funds. Or perhaps the employee holds the payroll deposit funds in his or her own interest-bearing account until it is time to make the payroll deposit to the government.
A payroll review by an independent accountant may help prevent such employee schemes. Even in small companies, it is possible to divide office tasks to make employee theft more difficult.
Give us a call; we will gladly review your company’s internal controls to determine what changes may be needed.